Wicked Fiber Questions

Commissioners to submit questions by Tuesday September 16.  Item back on agenda on October 7.  Wicked Fiber requests firm answer by November 11.

Questions from September 9, 2014 City Commission Meeting:

1. Does the City have to have money in the bank to guarantee a loan?

The City could reserve a portion of City General Fund reserves for the amount and duration of any required guarantee period. 

2. What are implications of a franchise fee waiver as requested?

First, it should be pointed out that franchise fee payments on internet services are not required.  Agreeing to pay franchise fees on internet services is above what other companies currently do and are required to do.  If franchise fees are waived for services that are required to pay franchise fees, such as video services or phone services, such action could jeopardize current franchise fee payments.  So, as long as the waiver is limited to the 5% of internet service receipts, there should be no negative implication beyond the lost revenue promised in the 2012 agreement. 

3. Is there excess unused fiber beyond the amount that Wicked Fiber is requesting?

Yes.  The map included in the City’s Fiber RFI shows potential available fiber above the City’s current needs and existing CWC agreement. These numbers were calculated based upon the City’s current needs and a small amount for future growth.  The conduits on the map include either 288 or 144 strands of fiber each.  So the remaining fiber available for leasing is shown at 96 or 48 strands depending upon whether the conduit contains 288 or 144 strands of fiber.  http://www.lawrenceks.org/assets/documents/pdf/fiber-rfi/AvailableCityFiber8x11_feb4cc.pdf

4. Provide comments about the proposed 30 year lease period.

Thirty (30) years is a very lengthy duration, especially related to technology.  Staff would recommend that leases be on a much shorter timeframe.  For example, our standard lease period for cell tower leases is five (5) years, usually with two options of five (5) years each.   The City’s right of way leases are typically ten (10) years.  It would appear that lease terms between five (5) and ten (10) years would be appropriate. 

5. What would staff recommend regarding a policy on the splicing issue?

Staff would recommend that the City of Lawrence retain control over splicing. This is an industry standard, has important security implications, and if not handled carefully could negatively affect the desire of other companies to utilize the city’s dark fiber in the future because security will be a factor with those companies.  KU has a list of approved vendors that handle its spicing activities.  In order to enable a company like Wicked Fiber several choices of vendors, it is recommended that the City of Lawrence bid on-call splicing work, utilizing similar qualifications to KU’s qualifications.  The top three lowest responsible bidders would be placed on an approved list. 

6. What is the potential for City need of the fiber in the next 30 years? 

The City has built in a small amount of future growth needs when calculating the dark fiber capacity outlined in question #3.  However, technology is changing rapidly (particularly over a 30 year time horizon) and the City could need more or less fiber depending on how future technology unfolds.     

7.  What is the effect on other franchise fees if we give Wicked a reduced or complete abatement?

See answer to question 2 above.

8.  What is the monetary effect if we allow the all the breaks if they are given considering that we will  make 5% on fees he is doing voluntarily? 

The effect is somewhat difficult to calculate.  The fiber asset that the City has is quite valuable.  As the RFI committee suggested, a market rate for fiber leasing should be established by the City.  There would be foregone revenue associated with waiving the lease rate under certain circumstances, but also benefits associated with it.  The amount generated by 5% on revenues would depend upon future market penetration.  Based upon CWC’s two quarters of franchise fee payments paid in 2012, the 5% currently generates roughly $14,000 per year.

9.  Can we give a 10 year lease that can be automatically renewed if criteria are met for success?  What would use to gage compliance or successful internet for the city? 

Criteria could include items such as:

· extension of fiber access to every business/residence within the service area

· provision of free services to certain non-profit organizations

· adherence with city regulations concerning access to fiber and other lease provisions

· current on payments due to the city, if any

· etc. 

10.  If we don't have criteria for certifying splicing what can we do correct that?

Yes.  See answer to question # 7 above. 

11.  Should we have a list of four or five companies that can splice versus the one we have now?

Yes.  See answer to question #5 above.

Questions for Wicked Fiber- see attached response from Community Wireless Communications: 

1. Can we get some financial information from wicked so we can feel comfortable in this transaction?

2. What guarantee do we have to limit excessive pricing on the common carrier threads that Wicked will put in?

3. If there is a default can we have information from the applicant that would inform us to who else would be using the system as collateral. 

4. Why does the bank need guarantees?

5. What assets does Wicked have on the line?

6. What happens if the company defaults on the loan?

7. What is the current solvency of the company?

8. Regarding the $1 million loan guarantee- what risk is the bank taking?